$2b of crypto assets wash traded on decentralized exchanges, report shows

Solidus Labs research finds $2 billion in deceptive wash trading activities across Ethereum-based decentralized exchanges. 

Newly released data from Solidus Labs, a crypto trade surveillance and risk monitoring platform, indicates that a staggering $2 billion worth of crypto assets has been wash-traded on Ethereum-based decentralized exchanges (DEXs) since 2020.

The report casts a spotlight on the pervasive but preventable issue of market manipulation in the world of decentralized finance (defi).

Tracing the pattern: Wash trades and manipulated crypto pools

Wash trade is a malicious tactic where traders place both buy and sell orders with themselves to artificially influence the market. Of roughly 30,000 DEX liquidity pools studied, Solidus Labs identified a striking 67% where wash trading had been conducted. In these manipulated pools, wash trading comprised 16% of the total trade volume. 

The report also shows how wash trading was used by scammers to lure investors into rug pull projects.

One particularly glaring example involved a meme token dubbed “SHIBAFARM.” The token was launched in mid-2021 when the meme coin hype was off the charts. As Shiba Inu (SHIB) and Dogecoin (DOGE) were also soaring at that time, the project used FOMO to attract investors. 

Solidus Labs found that a network of related wallets artificially inflated the token’s value, luring unsuspecting investors before suddenly pulling the plug, netting a profit of over $2 million.

The findings of the report are especially concerning given the growing prominence of defi, which often operates in less regulated spaces than traditional financial markets.